Bonus depreciation in 2026 (post-OBBBA)
OBBBA (Public Law 119-21, signed July 4, 2025) made 100% bonus depreciation permanent for property acquired after January 19, 2025. Most competitor calculators on the web still show the old TCJA phase-down rates.
What's the bonus depreciation rate for a rental I'm buying in 2026?
100%. The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) §70301 amended IRC §168(k) to make 100% bonus depreciation permanent for qualified property acquired after January 19, 2025. There is no scheduled phase-down. IRS Notice 2026-11 (January 2026) confirmed the application date and clarified transition rules for property in service across the inflection date.
Run a feasibility estimate at /cost-seg/?purchase_year=2026.
Did OBBBA reverse the bonus depreciation phase-down?
Yes — but only prospectively. The Tax Cuts and Jobs Act of 2017 set 100% bonus for 2017–2022 with a phase-down to 80% (2023), 60% (2024), 40% (2025), 20% (2026), and 0% thereafter. OBBBA §70301 struck the post-2024 portion of the phase-down and made 100% permanent for property acquired after January 19, 2025. The 2023 and 2024 rates (80% and 60%) were not reversed retroactively — those remain the law for property placed in service in those years, which matters for §481(a) look-back studies on 2023–2024 acquisitions.
What was the bonus rate for 2023 and 2024?
80% for 2023 and 60% for 2024 — these are the TCJA phase-down rates and OBBBA did not reverse them. For a look-back study on a property placed in service in 2023, the §481(a) catch-up uses 80% bonus on the reclassified 5-, 7-, and 15-year basis; for a 2024 placement, it's 60%. The full phase-down sequence under pre-OBBBA TCJA was: 2022=100%, 2023=80%, 2024=60%, 2025=40%, 2026=20%, 2027=0%. OBBBA replaced the 2025-and-later rates only.
Run a feasibility estimate at /cost-seg/?lookback=true&purchase_year=2023.
Is the 100% bonus depreciation permanent now?
Yes, as of OBBBA §70301. The amended IRC §168(k) sets the bonus rate at 100% for qualified property acquired after January 19, 2025, with no expiration date and no phase-down schedule. "Permanent" in tax-law terms means until Congress changes it again — there is no statutory sunset. Practical implication: cost segregation paired with bonus depreciation now has the same Year-1 economics it had during the 2017–2022 TCJA peak window, and §481(a) look-backs for 2025-and-later acquisitions will continue to use 100%.
Does cost segregation work without bonus depreciation?
Yes, just less dramatically. Cost segregation reclassifies basis from 27.5-year or 39-year MACRS into 5-, 7-, or 15-year MACRS classes (200% declining balance for 5- and 7-year, 150% DB for 15-year, half-year convention; see IRS Pub 946 Tables A-1 through A-5). Even without bonus, those classes deduct meaningfully more in early years than straight-line over 27.5/39 years — a 5-year asset deducts 20% in Year 1 under MACRS half-year vs. ~3.6% under 27.5-year S/L.
What if I bought my property in early January 2025 — which rate applies?
40%. OBBBA §70301 applies to property acquired after January 19, 2025. Property acquired on or before January 19, 2025 falls under the pre-OBBBA TCJA phase-down rate of 40% for 2025. This creates a bimodal year: a property closed January 10, 2025 takes 40% bonus on reclassified assets; one closed February 10, 2025 takes 100%. "Acquired" generally follows the §168(k)(2)(H) acquisition-date rules — typically the date of binding contract or, if later, the date the taxpayer takes possession.
Does bonus depreciation apply to used property?
Yes, post-TCJA. For property placed in service after September 27, 2017, IRC §168(k)(2)(E)(ii) extends bonus depreciation to used property as long as (1) the taxpayer or a predecessor did not use the property previously, and (2) the property is not acquired from a related party. This is what makes cost segregation on an existing rental purchase work — the new owner's first use of the property is what counts, not whether the building itself is new construction. OBBBA did not change the used-property rule.
Can I elect out of bonus depreciation?
Yes. IRC §168(k)(7) allows a taxpayer to elect out of bonus depreciation for any class of property for any tax year. The election is made on a timely filed return (including extensions) by attaching a statement, and once made it applies to all property in that class placed in service that year. Reasons owners commonly evaluate the election: a year with low taxable income where the deduction would be wasted, NOL planning under the post-CARES §172 rules, or coordination with §163(j) interest expense limits. The election is irrevocable without IRS consent.